European fund managers are looking at the weak euro, US inflation figures and the market's more cauti...
Stephanie Gerrard, fund manager for Aberdeen, says: "The level of confusion in the market is pretty high and not just in Europe but also the US. The Fed will step on the breaks faster, aiming for a 6.5% or higher target interest rate.
"The risk is that the market will slow down quicker than expected. Goldman Sachs has downgraded the US retail sector. Europe will not follow directly, but it will be affected by it."
Europe has not only to keep one eye on the US economy but must also cope with the weak currency, although this is not exclusively a bad thing.
Jeremy Podger, fund manager for Investec Guinness Flight, says: "On balance, the weak euro is a negative. But a number of companies have already reported the benefits of a weak euro and earnings growth for the current year is up from expectations a few months ago."
The cyclical upturn has been evident more in the larger companies and Podger is especially positive on the oil and pharmaceutical sectors. Steel, paper and chemical companies have also shown good returns and 2000 should be a good year for these companies. On TMT stocks, Podger is equivocal.
He says: "It is difficult to tell if you are long or short in this sector - you could be one way numerically but you might be holding more or less risky stocks."
There are still opportunities in the TMT market, even if the sector as a whole fails to make headway this year, but careful stock selection will be paramount. Podger feels technology is potentially revolutionary but expectations are high.
He says: "The revolution will happen incrementally. It is going to be easy to lose money in that area. Expectations are high for a massive adoption of the technology and for the money that comes with it. Well, show me the money."
Gerrard is similarly careful. She distinguishes pure growth stocks and growth cyclicals. While companies such as Ericsson and Nokia can be relied on to maintain profitability, companies exclusively focused on WAP technology and broadband networks are less certain.
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